ROYAL Bank of Scotland has been fined £14.5m for failing to ensure advice to mortgage customers was suitable.

The Financial Conduct Authority (FCA) said state-backed RBS had “serious failings”.

The FCA said only two of the 164 sales it reviewed between June 2011 and March 2013 were considered to meet the standard required overall in a sales process.

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Ross McEwan, RBS chief executive, who ran its retail unit from August 2012 until October last year, accepted the failings were unacceptable.

The FCA said it found RBS and its retail division NatWest had failed to consider the full extent of a customer's budget when making a recommendation, while staff didn’t advise customers what mortgage term was appropriate for them.

The regulator said there was no evidence there was widespread detriment to customers, although RBS and NatWest will contact 30,000 consumers so they can raise any concerns they have about advice they received.

The Financial Services Authority, the FCA's predecessor, raised concerns in November 2011 about branch and telephone sales at RBS and NatWest.

In 2012, RBS was the UK's sixth largest mortgage lender.

Tracey McDermott, FCA director of enforcement and financial crime, said: “Where we raise concerns with firms, we expect them to take effective action to resolve them without delay.

“This simply failed to happen in this case.

“Taking out a mortgage is one of the most important financial decisions we can make.

“Poor advice could cost someone their home so it's vital that the advice process is fit for purpose.

“Both firms failed to ensure that their customers were getting the best advice for them.”

Mr McEwan said RBS had worked hard to address the issues.

He added: “When I joined the bank we completely overhauled our processes, and took all our mortgage advisers off the front line for an extensive period of time to get the training required.

“Today's notice shows we still have challenges to face, but we are determined to take the steps needed to earn back our customers' trust.”

The fine represents the latest in a string of financial hits the bank has faced including fines and compensation pay-outs in the wake of a series of scandals.

These include £3.25bn to cover payment protection insurance mis-selling and £1.3 bn for interest rate swaps - complex financial products which were sold to small firms.

It has faced hundreds of millions of pounds in fines as part of the Libor rate-rigging scandal, and also paid out to settle sanctions-busting allegations with US authorities.

RBS made a loss of £8.2bn last year, which included making provisions for past scandals as well as the cost of setting up its internal bad bank to dispose of unwanted toxic assets.

But it swung to a pre-tax profit of £2.65bn for the first half of this year on the back of the resurgent economy.